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Data provides us with a vast amount of information about almost any subject. But it is also easy to be fooled by a partial presentation of data. Some entrepreneurs will tell you that revenue is all about your top line -- or your bottom line -- when in fact, it should be about both.

A few months ago, I took a trip to New York. On the way there, I took an Uber. On the return trip, I took a cab. Not surprisingly, Uber was cheaper than the cab, but by how much? It depends on who you ask and what they use as the denominator in the equation. If you use Uber’s fare as the base, then your derived percentage will be higher. If you use cab’s fare as the base, Uber is “only” 20% cheaper than cabs. One number by itself does not truly represent the whole story. I documented the charges by both these services, and found that Uber was 20 percent cheaper than cabs or cabs were 25 percent more expensive than Uber.

This is the beauty of data: The same data sets can be used to tell different stories. Numbers intrinsically stick in your the memory in a way that long, drawn out explanations do not. Most companies are quick to drop a favorable number. A company with multiple product lines will mention the huge growth and sales of one product only. But what about the other product lines? And what is the marketing budget behind that one product? The margins? Without these, we don't know the complete picture.

Understanding Context to Move Your Business Forward

I’m a huge fan of Microsoft Excel and love working with intense models and numbers. I used to detest working in Word. Over time, however, I have realized that they can enhance each other's value. Whenever you have to use a data point, try writing out a few sentences first to evaluate or justify those numbers in an overall context.

Context tells us whether something is either plausible or absolutely not plausible, irrespective of what the numbers tell us. Data conveys information. A 40% drop in website traffic on a given weekday is concerning, but is it worth calling an emergency meeting about? A further dive may reveal that a majority of the drop in traffic comes from lower email open rates due to beautiful weather. Writing this simple rationale down helps us distill our thoughts.

Check any data output that is the result of human input. Take a moment to evaluate that data point in its overall context. This can help us confirm whether the numbers make sense. If we are too deeply ingrained in the details of deriving the numbers and do not take a step back to look at the larger picture, it can often lead to mistakes.

For example, based on historical trends, let's say a productive employee can review 40 candidate applications per day. After compiling the report of total applications reviewed, look at the overall average to make sure it's in line for the day. If suddenly you see the average is 48 applications, investigate further. Did a couple of employees go way beyond the average (why and how)? Is there a data entry error?

During my corporate banking days, we prepared multiple reports from different sources for senior management. Since we were so deeply ingrained in extracting the individual numbers and compiling them in an Excel sheet, we often overlooked the larger picture. If the input had glaring errors, it would throw off the entire trend. This would sometimes cause our seniors to call an emergency meeting to overhaul operations, only to realize a plus sign had been used where a multiplication should have been in the spreadsheet.

Asking questions about a metric helps you understand the underlying causes and effects as well. It gives you the true indication behind the metric's utility and whether it truly reflects the health of your operations and company. Email open rates give you an indication of the health of your company’s email database. For apps, look at your daily/monthly engaged users.It's easy to spend heavily in marketing to drive app downloads, but engagement is the more difficult part. It shows stickiness of the product. A pure count in employee numbers is never an indicator of company growth. What about revenue or even profitability?

In this day and age, companies share a lot of numbers to bedazzle us. As a consumer of these statistics and data points, it's important to pay attention to the overall context. For every numerator, there is a denominator. Do not be fooled if only one half of the equation is presented. Ask for the other half to be fully informed.

Young Entrepreneur Council (YEC) is an invitation-only, fee-based organization comprised of the world's most successful entrepreneurs 45 and younger. YEC members…

Young Entrepreneur Council (YEC) is an invitation-only, fee-based organization comprised of the world's most successful entrepreneurs 45 and younger. YEC members represent nearly every industry, generate billions of dollars in revenue each year and have created tens of thousands of jobs. Learn more at yec.co. Questions about an article? Email feedback@yec.co.